Results of Bank for International Settlements Triennial Survey of Foreign Exchange and Derivatives Market Turnover

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28 Sep 2004

Results of Bank for International Settlements Triennial Survey of Foreign Exchange and Derivatives Market Turnover

The Hong Kong Monetary Authority (HKMA) announced today (Tuesday) the Hong Kong results of the Bank for International Settlements (BIS) triennial survey1 on the turnover2 of foreign exchange and derivatives. The BIS is also releasing the preliminary global results today, as are many of the participating economies.

In the global results, Hong Kong advanced one place from the 2001 survey to rank sixth in the global foreign exchange market, and seventh in the global foreign exchange and OTC derivatives market.

"The advance in Hong Kong's global ranking in terms of foreign exchange trading is encouraging as it reinforces Hong Kong's position as a competitive and active centre for foreign exchange and derivatives activities," said Mr William Ryback, HKMA Deputy Chief Executive.

The Hong Kong results were broadly in line with global trends. A detailed analysis of the survey results together with country comparisons will be provided in the December issue of the HKMA Quarterly Bulletin. Set out below are the key findings for the Hong Kong market.

Net foreign exchange turnover

Net daily turnover of foreign exchange transactions increased strongly by 52.9% to US$102.2 billion in 2004, compared with three years previously. Marked growth was seen in both spot and forward transactions, with the former increasing by 87.9% to US$35.6 billion and the latter by 39.0% to US$66.5 billion. Forwards, nonetheless, comprise a majority of the foreign exchange transactions and a large proportion was of short maturity of less than 7 days. As expected, Hong Kong dollar against US dollar remained the most heavily traded currency pair in the local market. Trading of other currency pairs also increased, reflecting the deepening of the foreign exchange market in Hong Kong.

Increased asset management activities in Hong Kong and the increase in treasury operations of banks on the back of narrowed lending margins were probably the key factors behind the growth. Particular market conditions, which included unprecedented low interest rates at near zero prompting investors to seek higher returns via the foreign exchange market, and the broad depreciation of the US dollar prompting investors to purchase non-US dollar foreign currencies for valuation gains, also additionally contributed to the growth.

Over-the-counter derivatives turnover

Average daily net turnover of over-the-counter (OTC) derivatives (both foreign exchange and interest rate derivatives) increased by 2.6 times to US$14.9 billion. Strong growth was seen in both foreign exchange derivatives and interest rate instruments, in particular the latter due to growing anticipation of interest rate increases in 2004.

In contrast to the significant increase in 2001, turnover in the Hong Kong dollar against the US dollar shrank by 38.2% in 2004. Its share to total net turnover thus fell noticeably from 28.2% in 2001 to 7.2%. With regard to single currency interest rate derivatives, US dollar denominated contracts surpassed Hong Kong dollar denominated contracts to represent the largest share of the gross turnover in 2004. Although Hong Kong dollar contracts grew strongly by 97.5%, its share reduced from 59.3% to 27.7% to rank third after the US dollar and Japanese yen as contracts denominated in Japanese yen increased strongly.

Hong Kong Monetary Authority
28 September 2004

Annex (PDF File, 112KB)

1 The survey was conducted as part of a global survey of 52 economies co-ordinated by the BIS. The 52 participating economies are: Argentina, Australia, Austria, Bahrain, Belgium, Brazil, Canada, Chile, China, Colombia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong SAR, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Latvijas, Lithuania, Luxembourg, Malaysia, Mexico, Netherlands, New Zealand, Norway, Peru, Philippines, Poland, Portugal, Russia, Saudi Arabia, Singapore, Slovak Republic, Slovenia, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United States and United Kingdom.

2 The turnover part of the survey comprised collection of data on gross turnover in notional amounts of foreign exchange spot, foreign exchange and interest rate over-the-counter (OTC) derivatives transactions in April 2004. Data were reported on a "locational" basis, i.e. based on the location of the sales desk of a deal as opposed to the booking location in the 2001 survey.

3 In Hong Kong, 58 market participants (272 in 2001) took part in the survey, comprising 54 authorized institutions and 4 major securities houses.

4 Includes outright forwards and foreign exchange swaps.

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Last revision date : 28 September 2004